Complacency Running High

Well, we sure didn't get a pop on Monday, as I had hoped. Instead, it was a session of nothingness -- with the exception of the now-out-of-favor Apple (AAPL). Let's face it: As I noted months ago, a market obsessed with one stock is not healthy, so -- ignoring Apple's plunge -- I would label Monday's action as bullish.

In fact, I would even note that the Nasdaq's volume breadth has been positive for eight out of the last 10 days. That's good. But it also makes the market overbought.

What I find most curious about this market is that the price has hardly budged. On the first day of the new year, the S&P 500 closed at 1462, and today it stands at 1470. That's 8 points in eight trading days. How about the Russell 2000, which everyone now seems to love? The index has risen 5 points since the start of the year. Yet, for all this sideways action, the sentiment has gotten incredibly complacent.

Several times now, I have highlighted the 30-day moving average of the equity put-call ratio. Now, the session's reading Monday -- which, might I remind you, was a day the market went nowhere -- came in at 52%, a typically low (and bearish) reading. We've already discussed the index put-call ratio; that has now been under 100% for five trading days in a row.

Then there is the sentiment chart that tracks the bloggers on the Internet. You can see how low it is on the chart below -- the bears have dipped under 15% for the first time since 2011.

On the S&P chart below, I have circled the three times we saw the bears dip down to this level in the last two years. The index did not fall immediately in these instances -- it actually spent a bit of time trying to go higher -- but, in the end, upside was limited and down the market went.

If you wanted to ignore this, you could say the bullish percentage was in the 60% area in two out of the three times the low bear ratio mattered -- and that current levels are not quite as high as this. The only time the bullish percentage was still in the 50s was June of 2011, and the forthcoming decline did not arrive until August. Still, no matter how you look at, complacency appears to be running high right now.

In the meantime, some bank earnings are due out this week, and the financials are the most recommended group of the year so far. The KBW Bank Index had better start behaving better than it's been doing, as they have underperformed the S&P since the second trading day of the year.

Sentiment is already a bit too giddy -- so if we lose the banks, Apple breaking $500 won't be the only thing folks are fretting over.